Hertz 2013 Annual Report Download - page 67

Table of Contents
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As of December 31, 2013 and 2012, the following guarantees (including indemnification commitments) were issued and outstanding:
Indemnification Obligations
In the ordinary course of business, we execute contracts involving indemnification obligations customary in the relevant industry and
indemnifications specific to a transaction such as the sale of a business. These indemnification obligations might include claims relating to
the following: environmental matters; intellectual property rights; governmental regulations and employment-related matters; customer,
supplier and other commercial contractual relationships; and financial matters. Performance under these indemnification obligations would
generally be triggered by a breach of terms of the contract or by a third party claim. We regularly evaluate the probability of having to incur
costs associated with these indemnification obligations and have accrued for expected losses that are probable and estimable. The types of
indemnification obligations for which payments are possible include the following:
Sponsors; Directors
We have entered into customary indemnification agreements with Hertz Holdings, the Sponsors and Hertz Holdings' stockholders affiliated
with the Sponsors, pursuant to which Hertz Holdings and Hertz will indemnify the Sponsors, Hertz Holdings' stockholders affiliated with the
Sponsors and their respective affiliates, directors, officers, partners, members, employees, agents, representatives and controlling persons,
against certain liabilities arising out of performance of a consulting agreement with Hertz Holdings and each of the Sponsors and certain other
claims and liabilities, including liabilities arising out of financing arrangements or securities offerings. Hertz Holdings also entered into
indemnification agreements with each of its directors. We do not believe that these indemnifications are reasonably likely to have a material
impact on us.
Environmental
We have indemnified various parties for the costs associated with remediating numerous hazardous substance storage, recycling or disposal
sites in many states and, in some instances, for natural resource damages. The amount of any such expenses or related natural resource
damages for which we may be held responsible could be substantial. The probable expenses that we expect to incur for such matters have
been accrued, and those expenses are reflected in our consolidated financial statements. As of December 31, 2013 and 2012, the aggregate
amounts accrued for environmental liabilities including liability for environmental indemnities, reflected in our consolidated balance sheets in
"Accrued liabilities" were $2.5 million and $2.6 million, respectively. The accrual generally represents the estimated cost to study potential
environmental issues at sites deemed to require investigation or clean-up activities, and the estimated cost to implement remediation
actions, including on-going maintenance, as required. Cost estimates are developed by site. Initial cost estimates are based on historical
experience at similar sites and are refined over time on the basis of in-depth studies of the sites. For many sites, the remediation costs and
other damages for which we ultimately may be responsible cannot be reasonably estimated because of uncertainties with respect to factors
such as our connection to the site, the materials there, the involvement of other potentially responsible parties, the application of laws and
other standards or regulations, site conditions, and the nature and scope of investigations, studies, and remediation to be undertaken
(including the technologies to be required and the extent, duration, and success of remediation).
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For a discussion of additional risks arising from our operations, including vehicle liability, general liability and property damage insurable
risks, see “Item 1—Business—Risk Management” in this Annual Report.
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We are exposed to a variety of market risks, including the effects of changes in interest rates (including credit spreads), foreign currency
exchange rates and fluctuations in fuel prices. We manage our exposure to these market risks through our regular operating and financing
activities and, when deemed appropriate, through the use of derivative financial instruments. Derivative financial instruments are viewed as
risk management tools and have not been used for speculative or trading purposes. In addition, derivative financial instruments are entered
into with a diversified group of major financial institutions in order to manage our exposure to counterparty nonperformance on such
instruments.
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Source: HERTZ CORP, 10-K, March 31, 2014 Powered by Morningstar® Document Research℠
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